The Financial Conduct Authority (FCA) is now placing greater emphasis on treating these customers fairly, with new guidance set to be released this winter.
Last month Mortgage Solutions asked brokers whether they have seen an increase in vulnerable clients, and whether they have adequate measures in place for dealing with these cases.
Almost half of brokers said they had seen an increase, with more than a quarter of these believing they were good at identifying people at risk of being vulnerable.
Two fifths answered they hadn’t seen an increase, but also believed they had good processes in place for spotting these cases.
Around a third of brokers said their firm could have better measures in place to identify and cater for people at risk of being vulnerable.
Covid increasing vulnerable clients
The regulator appears worried the pandemic will increase the number of people with financial difficulties and major life changes, such as jobs losses, pushing more into the vulnerable category.
Nicola Arbon, managing director at the Mortgage Hut, said: “Once coronavirus struck we saw a new category of vulnerable clients due to the economical issues the pandemic has caused.
“We have seen some clients lose their jobs and many more have been furloughed, being left at home while their employers wait to see how their businesses recover.”
David Sheppard, managing director at Perception Finance, said he had seen a notable uplift in the number of cases featuring a relationship break-up since the pandemic started.
In certain cases, these people may be deemed vulnerable.
However, Sheppard acknowledged it can be tougher in the current climate for brokers to identify who may be vulnerable, simply because there are fewer face to face meetings.
He added: “When you are looking someone in their eyes you can tell their emotional state – you can tell they are perhaps not coping so well.
“Over the phone this can be hidden – there will be people who won’t pick up on it and don’t hear that sign of vulnerability.”
Of course, just because someone is going through a major change, does not automatically make them vulnerable.
Sheppard said: “It’s about realising a one size fits all approach is not necessarily going to work.
“Respond to what you’re hearing and give advice accordingly – but that can be tricky.”
Kate Furzer, director at Gaia Financial, has also noticed an uplift in clients who could be considered vulnerable – in particular, more elderly borrowers.
Many of these people are in significant amounts of debt and looking to consolidate.
Furzer told Mortgage Solutions that her network provides good support for dealing with vulnerable customers, but the government and banks could do more.
Equity release concerns
Furzer expressed particular concerns about the equity release market and vulnerable customers.
The mortgage consultant said: “There’s a lot of advisers that have qualified for equity release… they have done the course because they know there’s more money in it.”
However, she felt the course to qualify “isn’t sufficient” and many of these advisers go on to speak to clients without the knowledge to “feel when it’s not right” when dealing with vulnerable customers.
The situation is a “recipe for disaster,” with problems likely to emerge in the future, Furzer added.
Andy Wilson, director at Andy Wilson Financial Services, specialises in the later life lending market and said vulnerability of clients has always been on his meeting agendas.
He said: “It is important to try and identify reasons why a particular client may be affected by issues that could leave them exposed to making the wrong financial decisions. With later life borrowing, there is often little time left to put resulting poor outcomes right.
“I do not see the actual issues of vulnerability as being much different to normal times.
“In my advice area, these include cognitive decline and issues of sound reasoning, loneliness, the recent loss of a partner or fears around the future loss, illness or infirmity, pressure from family members, and external pressures from such things as mortgage lenders requiring repayment of overdue mortgage redemptions.
“Covid has perhaps reinforced the fear of death, and loneliness during shielding and lockdown, but these only add to the potential list already affecting clients.
“The key is being able to identify them, which is not always easy – many are too embarrassed to reveal their concerns, and successfully hide or mask issues.”
